EMISSIONS: EUA Market to See Shortness in 2026, 2027 on Supply

Eurozone core inflation momentum increased in August, but remains below rates seen in April through June. As such, there shouldn’t be much to concern the ECB Governing Council, who will feel reassured by another deceleration in annual NSA services inflation. 

• MNI’s inflation momentum series are calculated as a 3m/3m seasonally adjusted annualised rate using ECB seasonally adjusted flash data.
• In August, core inflation momentum rose to 2.39%, up from 2.17% in July but below the 2.72% seen in June. On a sequential basis, core prices rose 0.24% M/M (vs 0.19% in July, 0.27% in June).
• Services inflation momentum ticked up to 3.09% (vs 2.99% in July), but remains comfortably below the >4% readings seen the three months prior. Services prices rose 0.36% M/M SA, a solid rebound from the soft 0.14% last month but below June’s 0.41%.
• Core goods momentum rose for a second consecutive month to 1.10% (vs 0,70% in July, 0.31% in June), with sequential price increases essentially flat at 0.03% M/M.

• There has been a contained dovish reaction to the ISM manufacturing report, with a small overall miss and then softer than expected prices paid & employment details vs robust new orders.
• Fed Funds implied rates are 0.5-1bp lower post-release for meetings out to 2026.
• Cumulative cuts from 4.33% effective: 23bp Sep, 35.5bp Oct, 55.5bp Dec, 67bp Jan and 81bp Mar.
• SOFR futures have rallied up to 2-2.5 ticks post-release in 2026-27 contracts, extending an earlier bounce off lows as they limit losses to 4 ticks from Friday’s settle (of which half came in yesterday’s holiday trading). As noted earlier, lifts off lows have been helped by a sharp pullback in WTI futures.
• The terminal implied yield remains in the H7, at 2.985% (+4bp from Fri) still a little above last week’s lows of ~2.95% were near the lowest closes since Oct 2024. 

• RES 4: 0.8769 High Jul 28 and the bull trigger   
• RES 3: 0.8744 High Aug 7 
• RES 2: 0.8728 76.4% retracement of the Jul 28 - Aug 14 bear leg   
• RES 1: 0.8709 Intraday high  
• PRICE: 0.8708 @ 15:18 BST Sep 2
• SUP 1: 0.8625/8597 50-day EMA / Low Aug 14 and the bear trigger 
• SUP 2: 0.8562 50.0% retracement May 29 - Jul 28 upleg 
• SUP 3: 0.8540 Low Jun 30 
• SUP 4: 0.8514 61.8% retracement May 29 - Jul 28 upleg

EURGBP is trading higher today. This has resulted in a breach of resistance at 0.8674, the Aug 25 and 29 high. The break signals a stronger reversal and suggests scope for climb towards 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high. Key support to watch lies at  support at 0.8597, the Aug 14 low. Clearance of this level would instead confirm a resumption of the recent bearish threat.